Chapter 2

Defining
Business
Ethics

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 Learning Outcomes
• Define the term business ethics

• Identify an organization’s stakeholders

• Summarize the history of business ethics

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 Learning Outcomes (continued)
• Identify and propose a resolution for an ethical
dilemma in your work environment
• Explain how executives and employees seek to
justify unethical behavior

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 Business Ethics
• Business ethics: Application of ethical standards
to business behavior
• Approaches involve two perspectives
• Descriptive - Documentation of what is
happening
• Normative (prescriptive) - Recommendation of
what should happen

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 Stakeholders
• Stakeholder: Someone with a share or interest
in a business enterprise
• Not every stakeholder will be relevant in every
business situation
• Concerns in terms of ethical operations
• Involvement of the stakeholders with the
actions of the organization
• Extent to which they would be impacted by
unethical behavior
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 Figure 2.1 - Stakeholder Interests

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 Figure 2.2 - Stakeholder Impact from
Unethical Behavior

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 Factors Ensuring Ethical Conduct
• Corporate governance: System by which
business corporations are directed and
controlled
• Code of ethics: Written standards of ethical
behavior that are designed to guide managers
and employees in making the decisions and
choices they face every day

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 Dual Function of Code of Ethics

• Serves as:
• A message to the organization's stakeholders
• Represents a commitment to the highest standards
of ethical behavior
• An internal document
• Represents a guide managers and employees in
making the decisions and choices

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 The History of Business Ethics
Several dramatic changes have taken place in the
business environment over the last four decades
• The increased presence of an employee voice
has made individual employees feel more
comfortable.
• The issue of corporate social responsibility has
advanced from an abstract debate to a core
performance-assessment issue with clearly
established legal liabilities

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 The History of Business Ethics
(cont)
• Corporate ethics has moved from the domain of
legal and human resource departments into the
organizational mainstream with the
appointment of corporate ethics officers with
clear mandates.
• An increasing number of organizations are now
committing to share their code of ethics with all
their stakeholders.

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 The History of Business Ethics
(cont)
• The 2002 Sarbanes-Oxley Act has introduced
greater accountability for chief executive officers
and boards of directors in signing off on the
financial performance records of the organizations
they represent.

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 Figure 2.3 - A Brief History of Business Ethics

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 Figure 2.3 - A Brief History of
Business Ethics (continued)

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 Resolving Ethical Dilemmas
• Ethical dilemma: Situation in which there is no
obvious right or wrong decision, but rather a
right or right answer
• Can be resolved by recognizing the type of
conflict
• Truth versus loyalty
• Short term versus long term
• Justice versus mercy
• Individual versus community

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 Resolution Principles for Ethical
Dilemmas
• Ends-based
Which decision would provide the greatest good
for the greatest number of people?
• Rules-based
What would happen if everyone made the same
decision as you?
• The golden rule
Do unto others as you would have them do unto
you
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 Justifying Unethical Behavior

Belief that an activity is within reasonable ethical and legal limits

Belief that an activity is in the individual’s or the corporation’s

best interest

Belief that the activity is safe because it will never be found out
or publicized

Belief that because an activity helps the company, it will be

condoned and the perpetrator will be protected

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 Team Exercises
• Build an argument for or against the situation:
You work in an IT department of a large international
company. As part of your performance review you were asked
about your goals for the coming year, and you shared that you
would like to become a Microsoft Certified Systems Engineer
(MCSE).You didn't get much pay raise but your boss told that
MCSE course as in the training budget and you are attending
the training next week. However after receiving the poor pay
raise, you applied for some jobs and you got an attractive job
offer. The new company may not give you that training for
coming to years. You told the interviewer for ne job that you
will complete the MCSE training prior to joining the ne job.
You successfully gain the MCSE certification and give your to
wek’snotice.You start with the new company with higher pay
grade. Is that ethical?
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
 Internet Exercises
• Locate the website for Ethical compliance
initiative (ECI) and review the ethics and
compliance toolkit.
• The ‘PLUS Ethical decision making model’ lists
seven steps to ethical decision making. What
are they?
• The Ethical Resource centre
www.ethics.org (also a part of the ECI)

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
 Suggested Readings.
• (www.ethics.org)

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